Canadian Tire Shakes Up Senior Ranks

Monday, December 03, 2012

Canadian Tire Corp. Ltd. is shaking up its senior ranks months before the next wave of U.S. retail competition hits Canada.

The company is reducing senior management by 5 to 10 per cent, replacing veteran executives with a younger generation in their late 30s or close to 40 and putting more responsibilities into fewer hands, while preparing the company for succession in the coming years, sources said. Those changes are aimed at shoring up its important tire and auto parts business, as well as smoothing crucial relations with its powerful store owners and cutting costs, ahead of U.S. discounter Target Corp. opening its first Canadian stores in March.

More Related to this Story retail Major retailers mark anniversary blitz ahead of Target invasion advertising How Sport Chek skated round the lockout Canadian Tire hikes dividend despite dip in profit A customer walks though a Leon's store in Toronto on Monday November 12, 2012 video Video: Leon's buys The Brick to fend off U.S. competitors Shoppers rush through the doors as Macy's opens for Black Friday.

Retail Video: Black Friday rings up $59.1-billion A UPS delivery man unloads boxes from a truck in New York Nov. 26, 2012. Cyber Monday's online sales got off to a brisk start, sending e-commerce retailers' shares higher and suggesting strong growth from earlier in the holiday shopping season would continue through December.

Chief executive officer Stephen Wetmore took the top job in 2009 with a strategy of strengthening Canadian Tire's roots of tires and auto parts. Now his new "" and shrunken "" top team of younger talent feels the pressure to make good on the plan.

Among the changes announced internally this week are revampings aimed partly at improving Canadian Tire's dealings with its store owners, whose feathers have been ruffled by some tech overhauls, sources said.

"A significant amount of experience has left the business," said Mark Petrie, an analyst at CIBC World Markets. "That naturally presents some challenges. But Canadian Tire has depth and will be able to fill in the holes." Canadian Tire is rushing to streamline operations and improve its core segments as it prepares for the arrival next year of Target. In a bid to beef up the Toronto-based retailer's leading sporting goods business, it unveiled on Wednesday an $85-million deal to acquire a premium hockey supplies chain.

But as Mr. Wetmore works to turn around Canadian Tire's tire and auto parts operations, which have been plagued by systems snags, he is feeling the heat to ensure good relations with its store owners "" essentially franchisors "" who are in critical talks with the company to renew their contract.

Sources said that some of the departing executives were seen to be unfriendly to store "dealers" "" or owners. "In order to get a resolution with dealers, you want people whom the dealers can trust," one source said.

Among the top executives leaving are 18-year Canadian Tire veteran Kristine Freudenthaler, a senior vice-president who has held a succession of technology and supply chain roles, including chief information officer.

Also exiting is Mike Arnett, executive vice-president of corporate development who has been with the company for 22 years and at one time led its retail division.

Earlier this year, in signalling a changing of the guard, Canadian Tire promoted Marco Marrone to head the retail arm, and named him chief operating officer.

Jim Danahy, a supply chain and retail specialist at consultancy CustomerLAB, said the changes are an orderly consolidation of positions as the company works to upgrade its challenged auto supply chain systems.

"They"™ve spent a lot of money "" and they"™ve done it a couple of times "" trying to get the automotive inventory systems running as efficiently as they need them to be," Mr. Danahy said.

In an internal e-mail to the company's employees, which detailed other shuffles as well, Canadian Tire said: "All these changes now give us the opportunity to further streamline our structure and responsibilities as we enter one of the most competitive retail environments in our history." Canadian Tire has been racing to overhaul operations and focus on core, growing categories, such as sporting goods and kitchen products. But it has struggled to make gains in what Mr. Wetmore has underlined as its most important segment "" tires and auto parts "" in an overall soft market.

Other changes have been in the works for months, including the departure soon of Glenn Butt, executive vice-president of automotive whose functions overseeing the auto department had been taken over by the company's head of marketing. Mr. Butt will run a Canadian Tire store in Burlington, Ont.

And Michael Medline was given the added responsibilities of leading Canadian Tire's clothier Mark's along with the retailer's sporting goods division. That puts Mr. Medline in line to be a possible CEO successor, vying with Mr. Marrone, sources suggested.

Part of Mr. Medline"˜s expanded duties will be overseeing its latest acquisition, which is expected to close early in 2013.

Canadian Tire announced it has an agreement to snap up the upscale Pro Hockey Life chain, a move aimed at further shoring up its position as the country's leading retailer of sporting goods.

Last year, Canadian Tire swallowed Forzani Group Ltd., Canada's largest merchant in the segment whose chains include Sport Chek and Sports Experts chains, for $770-million.

Mr. Petrie said that Canadian Tire's initiative to bolster its sporting goods business gives it an edge in a sector in which discounters Target and Wal-Mart Canada Corp. aren"™t top rivals.

With 23 high-end hockey stores in five provinces, Pro Hockey generates about $95-million of sales a year. Canadian Tire said the acquisition would be accretive to earnings in the first year.

The takeover is consistent with Canadian Tire's strategy to seek new ways to grow in its key categories, the company said.

The transaction is subject to receiving regulatory approvals, third-party consents and other customary conditions.